How much credit (or blame) does Gov. Snyder deserve?

As the race heats up between Republican Governor Rick Snyder and his Democratic challenger, Mark Schauer, it’s worthwhile to ask how much difference the election will make to the Michigan economy. The answer is that, while it will probably make some difference, no governor in any state can bring about sudden and dramatic improvements to the economy. Like it or not, the Michigan economy is greatly affected by events beyond our borders, over which we have little or no control.

It’s useful to review some history. John Engler became governor of Michigan in 1991. The economy was flat in his first year in office, but it gradually picked up speed. Engler’s policies may well have helped, but it also helped that the price of oil was very low in the 1990s. This helped fuel a nationwide manufacturing boom. The boom was great news for the Michigan economy, but it was not due primarily to policies enacted in Michigan.

Engler’s policies did not suddenly change direction in 2000, but the Michigan economy did change direction. The price of oil went up, the stock-market bubble burst, and the national economy slipped into recession. In the last 32 months of Engler’s administration, Michigan lost nearly a quarter of a million jobs. Just as the boom of the 1990s was shaped primarily by events outside Michigan, so was the downturn of the last few years of Engler’s term.

It doesn’t make sense to say that John Engler was a good governor until 2000, and then suddenly became a bad one. Rather, the ebb and flow of the macro-economy is largely due to things over which Engler, like any governor, has little control.

National trends rule

Jennifer Granholm was governor during an extraordinarily difficult time for Michigan’s economy. Michigan manufacturing was flat during the first five years of her administration, and then it collapsed in the Great Recession of 2008-09. But the Great Recession wasn’t caused by policies enacted in Michigan. It was made on Wall Street and in Washington, not in Lansing.

Michigan’s economy finally started growing again in 2010, the last year of the Granholm administration. Granholm’s policies did not suddenly change direction in 2010, but the Michigan economy did.

The rescue of General Motors and Chrysler was especially important to the recovery. If these companies had been allowed to crash and burn, there is a very real possibility that the entire automotive supply chain would have imploded, causing hundreds of thousands of additional job losses in Michigan. Granholm and the Michigan congressional delegation deserve credit for pushing hard for the rescue, but they needed the support of the Obama administration, and they needed to get enough non-Michigan votes to pass both houses of Congress.

This is not to say that Engler and Granholm made no difference. Both did things that helped Michigan’s economy. Proposal A, passed in 1994, dramatically increased funding for public schools in the poorest districts in Michigan. Granholm signed Michigan’s first Earned Income Tax Credit, which has helped huge numbers of Michigan’s neediest families. These are real achievements. As we have seen, however, there are limits to what any governor can do.

An inevitability

The state’s job recovery, led by professional and business services and manufacturing, was well underway when Rick Snyder took office in 2011, and it has continued on his watch. Some of the economic growth may well be due to Snyder’s policies. In my judgment, however, most of it would have happened anyway, because of the strong growth in the national economy and the rebound of the auto sector.

Elimination of the Michigan Business Tax was a centerpiece of Rick Snyder’s campaign for governor. The MBT had some very bad features, and I had advocated getting rid of it years earlier (although I also wanted the lost revenues to be replaced fully, which did not happen). But I never thought that removing the MBT would have a huge effect on overall economic growth. I think there is a good chance that the tax shift has contributed to the economic growth of the last two years, but the effect is probably small.

In addition to the fact that Michigan is dependent on the national economy, it’s also true that policies take time to have an effect. One of my favorites among Snyder’s policies is the expansion of access to early-childhood education. I believe this will make a big difference in the long run, but it won’t bear much fruit for more than a decade.

Mark Schauer and Rick Snyder are similar in some ways—I like both men, I admire them both, and I know that whoever wins will work extremely hard. But I am not saying that it makes no difference whom we elect. There are real policy differences between them, and the people of Michigan need to pay close attention to the differences. But whoever is elected will be governor of a state that is greatly affected by outside events. I hope the national economy doesn’t slip into another recession. But if it does, neither Snyder nor Schauer will be able to keep Michigan from feeling the pain. Moreover, regardless of whether Snyder or Schauer is elected, the winner must deal with a dysfunctional legislature.

I am not saying that governors are irrelevant. But no governor is a magician.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

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Comments

Dwhyte
Thu, 09/04/2014 - 9:50am
Thank you for a great article about why the blame game, and the hogging of credit engaged in by so many politicians is mostly bogus! I wish that more people in the press and in general recognized that the effects of national and global trends have a much bigger impact than the actions of a governor, or often, even a president. Rick Snyder deserves praise for his efforts to improve the functioning of the state government, and a lot of blame for his failure to get the republican caucus in the state legislature to do its job rather than engaging in childish political games and generating a lot of very divisive and useless legislation. Your reasoned look at this is very welcome.
George
Thu, 09/04/2014 - 10:54am
AMEN! It's a dysfunctional legislature in Congress and the State that is the problem.
Duane
Sun, 09/07/2014 - 1:27am
Dwhyte, I am interested in what criteria you used for determining the quality of an article. I look for what new information, at least things I haven't known, the author provides, for things I learn and can apply, for ideas that cause me to pause and think. Using these I wouldn’t score the article as high as your "great". The article only about generalities, there was nothing about how to assess candidates or office holders for their impact on the economy, there was nothing that would help readers to recognize any government activities that might have impact. With the credentials Mr. Ballard expected readers to be given ways to make more informed voting decisions, be offered examples of how politicians/governors can and do impact the economy rather than simply say it is driven by influences outside the state. Former Governor Blanchard’s attitude toward the Japanese auto manufacturers when they began looking to build plants here in US and first approach then Governor Blanchard is a case in point. His actions/attitude immediately stopped interest in Michigan and has seemed to have kept them away from Michigan since, it wasn’t due to outside influences, is an example Mr. Ballard may have offered. Governor’s actions can have an immediate detrimental impact on the economy, the positive impact may take longer but that has to do with the principles for governing a governor uses and the trust people, business people, have in the governor. A discussion of these types’ things is what I would have liked from Mr. Ballard, but he seems not to feel that is for the readers to think about. I have gained more from the comments about the article (including yours) than from the article, that is why I wonder what criteria you use to measure the quality of this article. I am interested in your thoughts on the criteria I use.
John S.
Thu, 09/04/2014 - 10:56am
Most everything the author says is true; however, it will not stop politicians from taking credit where credit is not due or passing blame where blame is not deserved. Politicians like to tell a good story, even if it's mostly a fairy tale. With respect to passing blame, negative ads often work, especially with the uninformed whose votes, nevertheless, can decide an election. Voters, apart from their party attachments, tend to focus most upon the nature of the times and whether the economy is getting better or getting worse.
Thu, 09/04/2014 - 11:33am
State Government does make a difference. When Rick Snyder took office,the state had not submitted an on-time or balanced budget for years, and Michigan was rated in the high 40's on the scale of worst state in which to do business. Not the only indicator, for sure, but a very important one. Now Michigan has a balanced budget and it's moved to mid-teens in terms of attractiveness for existing and new businesses. How does the national economy explain that?
Michigan Voter
Thu, 09/04/2014 - 3:51pm
The budget was balanced because money was pulled from Education, Police and Fire Departments,Community Health, etc. The citizens are at risk now and in the future. I don't see how that makes this state attractive for current and future businesses, nor anyone else. And let's not forget how the capital doors were locked to the citizens of this state during the Right to Work vote. I won't forget that on Election Day!!
Sun, 09/07/2014 - 9:43am
Michigan Voter....nice job reciting the liberal talking points!
Frank
Sun, 09/07/2014 - 10:00am
Are they still talking points if they happen to be true, though?
Paul DuBois
Mon, 09/08/2014 - 2:02pm
It is easier to submit an on time budget if both houses of the legislature are controlled by the same party as the governor. That is the reason it happened, not great leadership. Governor Granholm did not have that luxury.
Dennis Paradis
Thu, 09/04/2014 - 12:13pm
Excellent article Charlie! The sad thing from my perspective is that candidates keep claiming they can" fix" the economy( or their opponent will "ruin" the economy) because it resonates with the voters. Candidates will continue to make these generalizations to avoid having to provide any specifics. It is a disservice to voters, but will continue as long as it is effective.
Allyce
Thu, 09/04/2014 - 12:14pm
Ah, if we'd ever wake up and realize that pointing fingers never get the job done. Rolling up the sleeves and keeping those fingers busy might work better.
Chuck Fellows
Thu, 09/04/2014 - 1:01pm
Well balanced assessment. Although the general public may not, and term limited politicans certainly won't, consider the impact seven generations from today of the decisions you make now is criteria all should use making decisions and evaluating outcomes. We might cease repeating the same mistakes over and over again.
Charles Richards
Thu, 09/04/2014 - 2:57pm
Mr. Fellows is absolutely right about the importance of taking into consideration the long term consequences of our decisions. Societies (and individuals) with a low discount rate, the ability to postpone gratification do much, much better over the long term than societies with a high discount rate, who lack the ability to defer gratification.
John Porter
Thu, 09/04/2014 - 3:21pm
I really don't like the tone of this article. "I am not saying that governors are irrelevant. But no governor is a magician." Anybody who takes pride in their work would hate to have this guy around. Why bother trying to do a good job? Why bother communicating that what you are doing is important? This race seems to be shaping up about issues. Why the wet blanket?
Charles Richards
Thu, 09/04/2014 - 3:24pm
Professor Ballard is absolutely correct when he says, "I am not saying that governors are irrelevant. But no governor is a magician." But governors do make a difference at the margin. Their positive or negative contributions add to, or subtract from national and global trends. If more voters appreciated his point, our political discourse would be far less dysfunctional. We would not have candidates for Congress or the Legislature claiming that they know "how to create jobs". There would be less magical thinking and more realism. His complaint about our dysfunctional legislature, expressed in his statement: "Moreover, regardless of whether Snyder or Schauer is elected, the winner must deal with a dysfunctional legislature." is really a complaint about the electorate. The legislature is merely a reflection of the voters. And that is really troubling. I realize that the people of Michigan have been under particularly severe stress for the last ten or fifteen years, and that tends to degrade the capacity for rational thought, but it is important that we think things through if we are to prosper.
John Porter
Sun, 09/07/2014 - 1:58am
You are right on. It is the diminutive tone that I am objecting to. You are right about the legislature reflecting the people, almost I think. I think that legislators are a cut above most people who don't get involved or participate in our democracy. I have had many arguments with my sister who thinks the politicians are ruining the country. I said "No! It's the people themselves. If we threw all of the politicians out of office and started over, the people would vote the same ones back in." To which she responded . . . "You're more cynical than I am !"
James Papke
Fri, 09/05/2014 - 1:55pm
The discussion of economic spillovers and spatial externalities in an "open" economy is on target. The reward for not taking in one's own laundry in a higher level of economic activity; the penalties are a greater dependence on the national/international economies. This relationship also has important implications for the design and implementation of (state-local) government business taxation which governors seem not to recognize. Businesses are important consumers of state-local publiuc services and their taxes should reflect their value and volume. In an open market economy, the only way subnational governments can recover the public service costs iincorporated in private goods is if prices reflect total private and social costs and thereby achieve an efficient allocation of economic resources and obtain the revenue necessary to provide the public services. Arbitrary taxation or taxation by negotiation is economically inefficient and unfair.
Larry
Sat, 09/06/2014 - 9:54am
The overwhelming, most significant change in Michigan since Snyder became Governor has been the balancing of the state budget. This was directly related to Snyder and the Republican legislature. It flat out would not have happened under a Democrat governor or legislature. And, yes, a budget is balanced by cutting spending, something the democrat party knows nothing of. Snyder's other major achievement for the benefit of the state was enacting right to work legislation making business investment in Michigan significantly more attractive. Labor unions over the decades have driven Michigan into a wasteland for new private sector investment. Companies and jobs have been leaving the state for 50 years or more due to the labor union impact. Right to work states have gladly accepted these companies and their jobs. Labor unions are largely vestigial and serve no purpose other than to extract labor costs far beyond reasonable from wage-paying companies. Both of the above developments are solely due to Snyder and the republican legislature. To say Governors don't make too much difference is to ignore reality!